Wednesday, December 5, 2012

Harvard's Greatest Ever EconomicTextbook Salesman Provides Some Tax Advice

Greg Mankiw posts at his blog:
I don't normally give advice on personal finances, but in light of the fiscal situation we are facing, I will pass along one tidbit.  Consider converting some of your retirement savings into a Roth IRA. Over the past few years, I have converted all that I can, which is about half of my retirement savings.  
To make the best of a Roth conversion, you need liquid assets outside of retirement accounts to pay the resulting tax liability.  But if you can do this, you will shelter more of your savings from capital taxation, and you will avoid required minimum distributions when you turn 70 1/2, which means tax-free accumulation for a longer period of time.
To read more about this option, click here.
Note this is technically good tax advice, however, Congress is sniffing around pension plans and down the road could change the tax characteristics of the Roth IRA and you could be trapped at that time. Be careful.


7 comments:

  1. I've heard this advice all over, but as Bob has pointed out, this is only useful for those whose retirement is in the mid-term (i.e. those between 50 and 60). At 24, I shovel into my 401k because I get matching contributions that can defray the high taxes that will get to me no matter what I do.

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    1. Do you think those matching costs are going to be there in 40 years?

      That's naive.

      I take all my savings and put them in coins. When- not if- the hundreds of trillions of obligations the US fed

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    2. God, I hate how our fucked up patent and IP laws have destroyed what you can and can't do on a computer. /rant

      Anyway, take all that money out, pay the taxes, and buy either cheap farmland, overseas (Chile, Costa Rica, etc.) or buy gold or silver or liquor (if you have ample storage) or guns/ammo.

      This isn't "paranoid ranting"

      This is just a recognition that as a 24 (I'm not too much older)

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    3. Year old man, these "non-income return" investments will do better than any stock market.

      A "ZIRP" system is here to stay until it falls apart. No one, no 401K, no retirement plan, can survive in a "ZIRP". Morel likely you will get "Madoffed" and find yourself broke by trusting TPTB.

      And when it falls apart...it will be epic. Sorry to be a downer.

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  2. He's an asshole.

    They'll take the 401K and the IRA's like Argentina did. $3-$6 trillion.

    http://www.lewrockwell.com/orig11/okst1.1.1.html

    I cashed mine out. Went all into metal. It has doubled 3 times. I did well in my 401s but nothing like this.

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  3. Take the tax breaks NOW. Use the tax savings and buy physical gold. Who know what the tax situation will be like in 20 or 30 years.

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  4. How long before the ZIRP begins to materially affect pension funds? I know they are usually based on a 5% return, backed by a mix of equities and stocks. Hell, they usually base higher (+/-7%) and so they are f*c(ed

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